I was on an assignment to Canada during the period of January 2014 to April 2015.
After I came back, India’s Social Security Agreement with Canada came into effect on 1 August 2015. While I was there, I paid all the social security taxes in Canada. However, as I was not receiving any salary in India, my provident fund contributions were null. Does this now qualify me as an international worker? Currently, my employer is treating me as an international worker and deducting my provident fund at 12% on ‘total salary’ instead of 12% of ‘basic salary component’. I also wished to ask if this calculation is correct for international workers? If I am considered an international worker, can I now ask for refund of the social security payments done in Canada by any means? I did not have certificate of coverage during my stay in Canada.
An Indian employee may qualify as an ‘International Worker’ once he satisfies the following conditions:
(a) He has worked or is going to work in a foreign country with which India has entered into a Social Security Agreement (SSA),
(b) He is eligible to avail the benefits under the social security scheme of that country by virtue of eligibility gained or going to gain under the SSA.
Given that you have contributed towards the social security scheme in Canada, you will be eligible to avail the benefits from the social security system of Canada by virtue of the eligibility gained under the SSA.
Therefore, as per the current definition, you will qualify as an international worker.
Under the provident fund laws of India, as per the provisions that are applicable in case of international workers, the provident fund is to be calculated on total salary and allowances (which means the monthly pay) except for the allowances specifically excluded.
Monthly pay is defined to mean and include:
(a) basic wages,
(b) dearness allowance,
(c) retaining allowance,
(d) cash value of any food concession.
‘Basic wages’ is also separately defined to mean and include all cash emoluments except the following:
(a) cash value of any food concessions,
(b) dearness allowance, house rent allowance, overtime allowance, bonus, commission or any other similar allowance,
(c) gifts provided by the employer.
There is no upper cap for the monthly pay which is to be considered for provident fund calculation for international workers.
Therefore, your employer is correctly calculating the provident fund on your total salary.
According to our understanding, there is no refund available from Canada’s social security system.
However, you may be eligible for benefits from the Canadian social security scheme.
We recommend that you seek advice from a Canadian social security expert, to determine whether or not you can get a refund of Canada social security taxes that you have paid earlier.
Sonu Iyer is tax partner & people advisory services leader, EY India